SRO Pressures In Action

The argument that the court should void the Redevelopment Agency’s encumbrances now appeals to the Downtown Community Plan. The plan, goes the reasoning, calls for a much higher density of offices and employees than the YMCA hotel can provide. The hotel’s “development for another use would promote the…Community Plan.” If it weren’t for the Redevelopment Agency’s encumbrances on the hotel, it “could be redeveloped according to the Community Plan, which anticipates a higher, better, and more appropriate use” for the property.

I called Donald Cohen, executive director of the Center on Policy Initiatives, an organization that promotes local affordable housing. Cohen sat on the board of the Downtown Community Plan immediately prior to its update by the city council in 2006. There were some voices then, he told me, such as wealthy new condo owners, who viewed the downtown core as “a nice place for some, not all. But the area is a redevelopment zone and, as such, is required by statute to include a percentage of affordable housing.” A study that the board never released, he said, looked ahead 20 years to how much employment there would be downtown and what kind of housing the wages for those jobs could pay for. The study showed there would be plenty of need for affordable housing.

Redevelopment law gives tremendous power to the public sector, Cohen continued, such as eliminating blight, eminent domain, and tax increments. With that power comes the trade-off of affordable housing. “And there is no wiggle room,” he said. “Redevelopment is intended to lift up people, not just buildings.”

So return for a moment to the rooms now set aside at the 500 West Hotel for cheap rent. And let’s imagine that the court nullifies the agreement with the Redevelopment Agency to offer the rooms to low-income persons. Nevertheless, 500 Broadway says it has been told by the agency that offering the restricted rooms would still be required by the City’s Single Room Occupancy Ordinance. And any “successor owner” of the business would be likewise obliged.

But 500 West Broadway denies that the single room occupancy law has ever applied to its hotel business. As evidence, the company cites a section of California law called the Ellis Act, which “generally prohibits public entities from compelling property owners such as [500 West Broadway] to offer low income rental housing by regulation.” Exceptions to the Ellis Act are residential hotels, legally defined as those that rent rooms for longer than one month. But 500 West Broadway says it has always operated a transient occupancy hotel rather than a residential hotel, despite occasionally offering a few rooms for long-term living. It is telling, according to the complaint, that the City has “substantially benefited by annually imposing and collecting Transient Occupancy Tax from the Hotel since at least 2004, providing a significant source of revenue for the City’s general fund.”

So concludes the argument. The court should take from 500 West Broadway’s shoulders not the debt it still owes the Redevelopment Agency but the accompanying encumbrances. These, according to the complaint, make it difficult for the company to pay off all its creditors and eventually enrich its investors.

The court granted the San Diego city attorney until June 28 to hire outside counsel to prepare a rebuttal. On that date, I asked for a copy of the brief. A spokeswoman for the city attorney’s office replied by email, “We filed a motion to have the bankruptcy court abstain from entertaining the request to adjudicate matters of local zoning and housing law.”